Mr. Kamal, a resident and ordinarily resident aged 58 years, is engaged in the business of manufacturing steel. He is subject to tax audit under…

Computation of total income of Mr. Kamal for A.Y. 2025-26 Particulars Particulars Particulars ₹ I. Income from business or profession Net Profit 20,61,750 Add: Items debited but not allowable/item not credited but taxable while computing business income Employer's contribution to NPS in excess of 14% of salary - Employer's contribution to the extent of 14% of salary i.e., basic salary plus dearness allowance forming part of salary would be allowed as deduction. Thus, excess contribution i.e.,12,800 [₹ 80,000, being 20% of 4,00,000 less - 67,200 being 14% of 4,80,000 (₹ 4,00,000 + 20% of 4,00,000] has to be added back. 12,800 VRS expenditure - 1/5 th of expenditure on voluntary retirement scheme is allowable over a period of five years u/s 35DDA. Since whole amount of expenditure is debited to Profit and Loss A/c, 4/5 th has to be added back [3,50,000 x 4/5]. 2,80,000 Interest on loan taken for purchase of electric car used for personal purpose not allowable as deduction while computing business income as being expense of personal nature. Thus,2,70,000 [₹ 18,00,000 x 15%] has to be added back, since the same forms part of interest on loan debited to profit and loss account. 2,70,000 Sale proceeds of asset acquired for conducting scientific research taxable as business income under section 41(3) in the year of sale to the extent of lower of 7,00,000 (being the deduction allowed u/s 35) and - 6,00,000 being the excess of sale proceeds and deduction allowed u/s 35 i.e., (₹ 6,00,000 +7,00,000) over the capital expenditure incurred of 7,00,000 6,00,000 Loss on sale of asset of scientific research, not allowable 1,00,000 Undervaluation of stock [(₹ 4,38,000 -3,30,000) x 10/90] Note: Alternatively, undervaluation of closing stock i.e.,48,667 can be added back and under valuation of opening stock i.e., 36,667 can be reduced from net profits. 12,000 Depreciation as per books of A/c 9,25,500 22,00,300 42,62,050 Less: Depreciation as per Income-tax Rules, 1962 5,50,000 Depreciation on Motor car purchased for supply of finished goods [₹ 3,50,000 x 15%] 52,500 6,02,500 36,59,550 Less: Items of income credited to profit and loss account but not taxable or taxable under any other head of income Winning from lottery [Taxable under the head "Income from other sources"] 47,250 36,12,300 II. Capital Gain Long-term capital gains Compulsory acquisition of industrial plot by the Central Government taxable as per section 45(5) Compensation received 15,00,000 Less: Indexed Cost of acquisition [₹ 2,50,000 x 363/167] 5,43,413 Long-term capital gain [Since such plot is held for more than 24 months] 9,56,587 Less: Exemption u/s 54D Acquisition of industrial plot within 3 years 7,00,000 2,56,587 III. Income from other sources Winning from lottery [₹ 47,250 x 100/70] 67,500 Interest on enhanced compensation 1,05,000 Less: 50% of enhanced compensation 52,500 52,500 1,20,000 Gross Total Income 39,88,887 Less: Deduction under Chapter VI-A Deduction under section 80EEB Interest on loan taken for purchase of electric vehicle allowable as deduction to the extent of 1,50,000 1,50,000 Total Income 38,38,887 Total Income (Rounded off) 38,38,890 Computation of tax liability of Mr. Kamal for A.Y.2025-26 Particulars Particulars ₹ Tax on long-term capital gains @20% of 2,56,587 51,317 Tax on winning from lottery @30% of 67,500 20,250 Tax on total income (excluding LTCG and winning from lottery) of 35,14,803 Upto 2,50,000 Nil 2,50,001 - 5,00,000 [@5% of 2.50 lakhs] 12,500 5,00,001 - 10,00,000 [@20% of 5lakhs] 1,00,000 10,00,001 -35,14,803 [@30% of 25,14,803] 7,54,441 8,66,941 9,38,508 Add: Health and education cess@4% 37,540 Tax liability 9,76,048 Tax liability (rounded off) 9,76,050